If you had taken 1 in real value, invested it in the stock market in January 1871, reinvested the dividends, and paid no taxes, you would have 16,000 today. Such are the returns to patience, risk-bearing, diversification, and capital ownership in the extraordinary economic boom that was the extended American century.

...but I am perfectly happy to admit that it exceeded my expectations, partly because I was prepared to be slightly let down by some of the bigger promises.... What's still valid about my hesitation in recommending the first-generation iPhone is that AT&T's EDGE network truly is too slow for anything but simpler text-heavy Web sites and for email, and that viewing Web pages and other text that's designed for wide-column layout is hard to read on screen. The former problem will be solved with an updated piece of hardware that uses the third-generation (3G) cell network. The latter problem could be solved in software, by offering an option to rewrap text streams into narrower columns for better legibility.

How Supply-Side Economics Trickled Down - New York Times: AS one who was present at the creation of “supply-side economics” back in the 1970s, I think it is long past time that the phrase be put to rest. It did its job, creating a new consensus among economists on how to look at the national economy. But today it has become a frequently misleading and meaningless buzzword that gets in the way of good economic policy...

Hoisted from Ten Years Ago: Still, I think, true today. Thus I continue to hoist my neoliberal freak flag here: Is It Really Harder to Make the Case for Free Trade These Days?http://delong.typepad.com/sdj/2007/04/is_it_really_ha.html: Paul Krugman wonders if it is harder to make the case for free trade these days. There are more losers from trade liberalization, he thinks, and it is much less clear that the losers are in some sense "undeserving".

Here in the United States, there were always three arrows to "hysteresis"—to the argument that the failure to adopt policies that properly fought the downturn of 2008-2009 in an aggressive manner to restore full employment rapidly did not just temporary but permanent damage to the economy's productive potential. A long period of very slack demand:

Project Syndicate: J. Bradford DeLong: Where US Manufacturing Jobs Really Went: In the two decades from 1979 to 1999, the number of manufacturing jobs in the United States drifted downward, from 19 million to 17 million. But over the next decade, between 1999 and 2009, the number plummeted to 12 million. That more dramatic decline has given rise to the idea that the US economy suddenly stopped working–at least for blue-collar males–at the turn of the century...

I was about to post this to celebrate the publication of our After Piketty: The Agenda for Economics and Inequalityhttp://amzn.to/2ptneiD—the last thing Meltzer wrote I ever read. I think it is how he would like to be remembered. I think it speaks for itself:

Allan Meltzer (2014): The United States of Envy: "Support for the alleged social benefits of setting much higher marginal tax rates on the highest incomes...

...has now been endorsed by the International Monetary Fund, based heavily on research by two French economists named Thomas Piketty and Emanuel Saez. The two worked together on the faculty at MIT, where the current research director of the IMF, Olivier Blanchard, was a professor. Like Piketty and Saez, he is also French...

Project Syndicate: J. Bradford DeLong: Where US Manufacturing Jobs Really Went: In the two decades from 1979 to 1999, the number of manufacturing jobs in the United States drifted downward, from 19 million to 17 million. But over the next decade, between 1999 and 2009, the number plummeted to 12 million. That more dramatic decline has given rise to the idea that the US economy suddenly stopped working – at least for blue-collar males – at the turn of the century... Read MOAR at Project Syndicate

It has become conventional wisdom that class politics has no legs in the United States today—and for good reason. Regardless of actual circumstance, an overwhelming majority of Americans view themselves as middle-class. Very few have any bone to pick with the rich, perhaps because most believe they will become rich—or at least richer—someday. To be sure, the issues of jobs and wages inevitably make their way into our political campaigns—to a greater or lesser extent depending on where we are in the business cycle. But they seldom divide us as much as simply circle in and out of our political life. Lately anxiety about the economy has been palpable, but for the most part it has not evolved into anger or found specific scapegoats.

The key seems to me to build intelligent machines that will assist workers in labor-intensive industries, rather than build intelligent machines that will eliminate workers in capital-intensive industries. The first is a clear win. The second can be a major loss if the things made in capital-intensive industries are close enough substitutes for the products of labor-intensive industries to greatly drop their value.

Mnuchin is drawing the issue narrowly: the particular technologies called "Artificial Intelligence taking over American jobs". And he is, at least as I read him, is elliptically criticizing high stock market values for "unicorns": companies with valuations above a billion dollars and yet no past record or clear future path to producing revenues to justify such valuations. **Read MOAR Over at Project Syndicate

Q: Libertarian economic theorists tend to believe that trade deficits are of minimal importance. Do these deficits really have a great impact on America's economy?

A: If the president and congress are not doing their job through fiscal policy--regulating government spending and taxing--and the Federal Reserve is not doing its job through monetary policy--regulating the supply and price of liquid purchasing power--in order to maintain full employment, then, yes, a trade deficit can make matters much worse.

Measuring Productivity Growth: The world's population today is about 20 times richer than it was back during the long Agrarian Age from 7000 BC to 1500, during which limited resources, slow technological advance, and Malthusian pressures kept the overwhelming proportion of human populations at near-"subsistence"--incomes of less than $1.50 per person per day. Today only 1/15 of the world's population is that poor. And today if we were to take the total money value of what we produce and use it to buy what people receiving less than $1.50/day buy, at current prices the value of global output would be $30/day per person. That is our roughly $80 trillion of annual global income today.

Our age--meaning 2000-2020, and longer, but how far into the further future I do not know--is not an age of the Rise of the Robots.

It does not, primarily, see the replacement of human workers by information technology on a large scale, and the consequent generation of technological unemployment.

What it does see, primarily, are two different ongoing processes:

The extraordinary build-out of our global mobile communications infrastructure, the shift of people's leisure and work time toward making use of that infrastructure, and consequent large potential gains in human utility largely unconnected with increases in measured GDP or measured productivity.

A now fourteen years-long and continuing era of near-deflation and slack aggregate demand producing first a small and now a large chronic shortage of jobs.

But, as the very sharp Larry Mishel keeps pointing out with increasing frustration, ours is not the age of the Rise of the Robots.

Joel Mokyr's (2016) A Culture of Growth: The Origins of the Modern Economy (Princeton, NJ: Princeton University Press: 9780691167773: http://amzn.to/2c9TJ2y), published in October 2016, is the latest and most successful extended brief by Northwestern University economic historian Joel Mokyr for his point of view on the causal origins of modern economic growth.

: As Cosma Shalizi (2010) Says, "The Singularity Is in Our Past": Look at the bleeding edge of urban North Atlantic or East Asian civilization, and you see a world fundamentally unlike any human past. Hunting, gathering, farming, herding, spinning and weaving, cleaning, digging, smelting metal and shaping wood, assembling structures--all of the ‘in the sweate of thy face shalt thou eate bread’ things that typical humans have typically done since we became jumped-up monkeys on the East African veldt--are now the occupations of a small and dwindling proportion of humans.

Joseph Ford Cotto: Prominent economists and politicians often say that free trade will benefit America in the long run. Many Americans disagree strongly. What is your take on this situation?

Dr. J. Bradford DeLong: Well, typically and roughly, the average import we buy from other countries we get for 30% off--we use foreign currency that costs us $1.40 to purchase goods and services made abroad that would cost us $2.00 worth of time, energy, resources and cash to make at home.

Rethinking Productivity Growth: Fresh at Project Syndicate: Today, the world’s population is, on average, about 20 times richer than it was during the long Agrarian Age. Between 7000 BC and 1500 BC, resources were scarce, technological progress was slow, and Malthusian pressures kept almost all human populations at a near-subsistence level, with per capita daily income of less than $1.50 in today’s terms. In 2017, only around 7% of the world’s population is that poor. Read MOAR at Project Syndicate

...First, living standards are negatively related to the size of population... fixed factor[s] of production... agricultural land, but you could just say resources.... Second... population growth is positively related to living standards.... At this point, everything else follows.... Everything in the system is pushing back towards some middle ground where the resource per person, and hence the living standard, is at just the right level so that population growth is zero...

Sukkoo Kim (2006): Division of Labor and the Rise of Cities: Evidence from US Industrialization 1850-1880 Journal of Economic Geography 6, pp.469-491. <http://www.nber.org/papers/w12246>

If commodities are fully rival and excludible—i.e., the resources devoted to the production of one unit are thereby used up, and cannot be used to aid in the production of a second unit; and if sellers can easily prevent non-buyers from benefiting from what they produce (and non-buyers can easily prevent sellers from imposing costs on them—then, if the distribution of wealth accords with desert and utility, the competitive market economy in equilibrium does the job.

If commodities are fully rival and excludible—i.e., the resources devoted to the production of one unit are thereby used up, and cannot be used to aid in the production of a second unit; and if sellers can easily prevent non-buyers from benefiting from what they produce (and non-buyers can easily prevent sellers from imposing costs on them—then, if the distribution of wealth accords with desert and utility, the competitive market economy in equilibrium does the job.

If commodities are fully rival and excludible—i.e., the resources devoted to the production of one unit are thereby used up, and cannot be used to aid in the production of a second unit; and if sellers can easily prevent non-buyers from benefiting from what they produce (and non-buyers can easily prevent sellers from imposing costs on them—then, if the distribution of wealth accords with desert and utility, the competitive market economy in equilibrium does the job.

If commodities are fully rival and excludible—i.e., the resources devoted to the production of one unit are thereby used up, and cannot be used to aid in the production of a second unit; and if sellers can easily prevent non-buyers from benefiting from what they produce (and non-buyers can easily prevent sellers from imposing costs on them—then, if the distribution of wealth accords with desert and utility, the competitive market economy in equilibrium does the job.

But how often is production really constant returns to scale? And how often are spillovers truly absent? And where and when are markets thick enough to actually be in any form of “competitive equilibrium”?

It carries up to 29 tons in its 2,000 cubic feet of recommended available space – goods worth roughly $500,000 (or more) when sold at retail.

It, and what it carries, can be transported in a month anywhere in the world where there are suitable harbors, railways, locomotives, flatcars, truck tractors, diesel fuel, and roads.

It is the modern cargo container, and it is able to move non-fragile, non-perishable goods from any modern factory with a loading dock to any modern warehouse anywhere in the world for about 1% of retail value.

It's disturbing. As we face the probable abrogation of NAFTA, possible trade wars with China, Germany, and others, and the total cluster** that is the Trump administration's policies (if any) toward NATO and Russia, a number of really smart and really well-intentioned people are, I think, making rhetorical--and in some cases substantive--errors that are degrading the quality of the debate and increasing the chances of bad outcomes. And they are doing it while trying to be forces for good, light, human betterment, truth, justice, and the American way...

How large are the benefits of transportation infrastructure projects, and what explains these benefits? This paper uses archival data from colonial India to investigate the impact of India’s vast railroad network. Guided by four results from a general equilibrium trade model, I find that railroads: (1) decreased trade costs and interregional price gaps; (2) increased interregional and international trade; (3) increased real in- come levels; and (4), that a sufficient statistic for the effect of railroads on welfare in the model accounts for virtually all of the observed reduced-form impact of railroads on real income in the data.

Was the Soviet Union an Asian economy, (like) a Latin American economy, a (central or western) European economy, or a settler-frontier economy?

If it was an Asian economy, than it did well on economic growth--even though horribly (save in comparison to Maoist China, the Khmer Rouge, and the Korean Hereditary Dictatorship of the God-Kings Kim) in terms of societal well being.

If it was a Latin American economy, it did OK in terms of economic growth--Allen says "good", but I think he overstates his case: "OK".

If it was a (central or western) European economy, it did very badly--badly enough to prompt its bloodless overthrow.

If it was a settler-frontier economy, its badness attains world-historical levels.

I reject Allen's conclusions, largely because of the regression-discontinuity study I did in the middle of the 1990s:

The discontinuity between the countries on the left and the countries on the right is simply where Stalin's (or Mao's, or Giap's) armies stopped. The communist countries were, as of the moment that the Iron Curtain collapsed, missing 88% of their prosperity as measured by what seems and seemed to be the most natural yardstick.

How large a cumulative real price decline is 1.3%/year on average over 160 years?

How do we understand the combination of falling watch prices in terms of labor time with stable prices in terms of labor time of necessities in Britain between 1650 and 1810?

Was there equivalents of the watch in terms of technological improvement over 1490-1650? Or 1330-1490? Or 1170-1330? What were they, and why were they what they were?

If it is indeed the case that making an equivalent-quality watch from metal ore and energy took only 1/8 as much time and trouble in 1810 as it had taken in 1650, where should we look to understand the details of this extraordinary improvement?

When and why did British artisans cease being the world's watchmakers?

Is this a "what markets do" paper or a "what planners should do" paper?

Solow says that hitherto prices for exhaustible resources have been falling "presumably" (a) because "extraction costs are falling through time", as opposed to alternative explanations based on (b) investor myopia, (c) insecurity of property rights, and (d) a failure of the market to properly mobilize society's risk bearing capacity. Why does Solow jump immediately for (a)--the market is doing it right--rather than for (b), (c), and (d)?

Does the path of the price of, say, oil since 1950 conform to Solow's model and expectations? Why or why not?

What does Solow have to say about "pure" time preference?

Why does Solow think it most important to focus on the zero-technological-progress case?

Harold Hotelling (1931): The Economics of Exhaustible Resources Journal of Political Economy

Project Syndicate:Trade Deals and Alternative Facts: BERKELEY – In a long recent Vox essay outlining my thinking about US President Donald Trump’s emerging trade policy, I pointed out that a “bad” trade deal such as the North American Free Trade Agreement is responsible for only a vanishingly small fraction of lost US manufacturing jobs over the past 30 years. Just 0.1 percentage points of the 21.4 percentage-point decline in the employment share of manufacturing during this period is attributable to NAFTA, enacted in December 1993.

A half-century ago, the US economy supplied an abundance of manufacturing jobs to a workforce that was well equipped to fill them. Those opportunities have dried up. This is a significant problem: a BIGLY problem. But anyone who claims that the collapse of US manufacturing employment resulted from “bad” trade deals like NAFTA is playing the fool. Read MOAR at Project Syndicate

Fund Grasping Reality...

We Are with Her!

Looking Forward to Four Years During Which Most if Not All of America's Potential for Human Progress Is Likely to Be Wasted

With each passing day Donald Trump looks more and more like Silvio Berlusconi: bunga-bunga governance, with a number of unlikely and unforeseen disasters and a major drag on the country--except in states where his policies are neutralized.

Nevertheless, remember: WE ARE WITH HER!

Definitely Worth Reading...

Blogging: What to Expect Here

The purpose of this weblog is to be the best possible portal into what I am thinking, what I am reading, what I think about what I am reading, and what other smart people think about what I am reading...

"Bring expertise, bring a willingness to learn, bring good humor, bring a desire to improve the world—and also bring a low tolerance for lies and bullshit..." — Brad DeLong

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"Tone, engagement, cooperation, taking an interest in what others are saying, how the other commenters are reacting, the overall health of the conversation, and whether you're being a bore..." — Teresa Nielsen Hayden

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